THE Prime Minister has urged Liberals not to give up on the NSW campaign, saying the election is still winnable if the party can tap into the "subterranean" mood for change.

Speaking yesterday at a fund-raising lunch at Darling Harbour, organised by the Liberal Party's Millennium Forum, John Howard said the psychology of the next two weeks would be crucial.

"Please believe me, this Government can be defeated," he said. "It can be defeated and it deserves to be defeated."

Mr Howard's pep talk came as the NSW Coalition launched attack advertisements that focus on the Iemma Government's most unpopular members: the Planning Minister, Frank Sartor, the Treasurer, Michael Costa, and the Ports Minister, Joe Tripodi. The ads warn that if the Government is returned these ministers will be free to do as they please.

Mr Howard said voters often did not make up their minds until the last two weeks of a campaign, especially in state polls. "There wasn't a commentator in Australia … who thought that two weeks out from the 1999 election, Jeff Kennett could be defeated by Steve Bracks," he said. "It taught me that people can sometimes conceal in a subterranean way their feelings about change."

In a stinging attack on Labor, Mr Howard said that in his experience of state governments, NSW was the worst. "This state has been the beneficiary of the most benign economic conditions in the last 50 years … and they have squandered it," he said. "I think this state has been very badly served by Labor."

The NSW Opposition Leader, Peter Debnam, used his warm-up speech to accuse his opponent, Morris Iemma, of seeking to buy re-election with a "dishonest" saturation advertising campaign.

Liberal strategists believe Labor is spending $300,000 a night on television ads which focus on Mr Debnam's previous careers in the navy and in business and warn that he is too risky.

"Morris Iemma is seeking to scare people back into the arms of the Labor Party … but what else would you expect from someone who learnt his politics from Graham Richardson?" Mr Debnam said. "'Whatever it takes' - that's his mantra."

Labor has targeted Mr Debnam's directorship of a prawn hatchery that went into liquidation in 1991. But the Opposition Leader said this amounted to a sign that "people with real life experience need not apply".

"Business is tough and it doesn't always go your own way," he said. "Just ask [Aussie Home Loans's] John Symond or any of the other great business successes in this state … in Morris Iemma's book, these men and women would be considered failures."

He contrasted Mr Iemma's history as a "party hack" with his time in the navy. "When you're on watch on a destroyer, hundreds of miles out in the Pacific Ocean, in the middle of the night, with hundreds of people asleep below deck, that's when you learn what responsibility is all about."

Mr Iemma said: "This is [Peter] Debnam's white flag - he has nothing positive to say, no idea, no plan and so hence he reverts to … a smear campaign. He has given up on putting anything positive forward, [he has] no plan on how he will improve or expand services."

The Premier denied that Labor was running its own smear campaign in the ads highlighting Mr Debnam's business failures. "He said one of the reasons he should be premier is his business record," Mr Iemma said. He said there was a "big black hole" in Mr Debnam's promises to cut 20,000 jobs from the public sector and it was impossible to make such cuts without affecting services.

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